Redhall recovery continues

The recovery at engineer Redhall seems to be continuing as planned. Having endured losses and significant restructuring, the business returned to profit at the operating level. Crucially there has been further good progress in building the manufacturing order book.

 Redhall recovery continues

Redhall is focusing on its speciality manufacturing capability in ‘high-integrity structures’. These include blast-proof doors and walls for use in nuclear, defence and transport industries.

There’s an increasing amount of design and know-how in these products and over time the company should be capable of earning a double digit margin here, compared to its latest 5 per cent return on sales.

Most contracts have the government as the ultimate customer with work from Crossrail, Sellafield and the defence industry.

The manufacturing order book has grown from £17 million at the half year to £23 million in September. The company is also tendering for ‘significant’ work which would underpin a ‘strong and sustainable long term order book’.

This includes doors for the Hinkley Point nuclear plant where the contract is due to be awarded next summer.

Exceptional items should fade away now the restructuring has been completed. Net debt rose last year but is expected to drop from £8.2 million to £6.5 million in the current year, mainly due to the forecast improvement in profitability. At 8.75p the prospective p/e is 16.

This drops to 7.5 times on September 2018 numbers, leaving the shares room to make further progress. Good news on those significant tenders should also lead to another leg up in the stock.

 

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